Class 11 Accountancy Important Chapter 8 Financial Statements – I

Class 11 Accountancy Important Chapter 8 Financial Statements – I Solutions English Medium As Per AHSEC New Syllabus to each chapter is provided in the list so that you can easily browse through different chapters ASSEB Class 11 Accountancy Important Solutions and select need one. AHSEC Class 11 Accountancy Additional Notes English Medium Download PDF. HS 1st Year Accountancy Important Solutions in English.

Class 11 Accountancy Important Chapter 8 Financial Statements – I

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Financial Statements – I

Chapter: 8

IMPORTANT QUESTION AND ANSWER

Short Question and Answer:

1. What are adjusting entries, and why are they necessary for preparing final accounts?

Ans: Adjusting entries are necessary to update the financial records to reflect accurate financial information at the end of an accounting period. They ensure that all accrued incomes and expenses are recorded in the correct period, ensuring compliance with the accrual basis of accounting.

2. What is meant by provision for doubtful debts?

Ans: Provision for doubtful debts is an estimate of the amount of receivables that may not be collected. This provision is created to account for potential bad debts and is shown as a deduction from the debtor’s balance in the balance sheet.

3. How are prepaid expenses treated in the final accounts when given inside or outside the trial balance?

Ans: When given inside the trial balance, prepaid expenses are deducted from the respective expense account and shown as an asset in the balance sheet. If given outside, an adjustment entry is made to deduct the prepaid amount from expenses and show it as an asset.

4. What is the journal entry for outstanding salary?

Ans: The journal entry for outstanding salary is to debit the salary expense account and credit the outstanding salary account, showing it as a liability in the balance sheet.

5. What is the treatment of closing stock in final accounts?

Ans: Closing stock is credited to the trading account, and it is shown as an asset in the balance sheet at its market value.

6. How is interest on capital treated in the profit and loss account?

Ans: Interest on capital is treated as an expense in the profit and loss account. The amount is deducted from the net profit, and the interest is shown as a liability in the balance sheet.

7. What is the adjustment for accrued income, and how is it shown in the financial statements?

Ans: Accrued income refers to income that has been earned but not yet received. It is added to the relevant income in the profit and loss account and shown as an asset in the balance sheet.

8. What is meant by income received in advance? How is it treated in final accounts?

Ans: Income received in advance refers to money received for services or goods to be delivered in the future. It is treated as a liability and shown on the balance sheet under current liabilities.

9. How is depreciation accounted for in the final accounts?

Ans: Depreciation is charged on fixed assets to reflect the wear and tear over time. The journal entry for depreciation is to debit the depreciation expense and credit the asset account. It is then deducted from the asset’s value in the balance sheet.

10. What is the treatment for bad debts in the final accounts?

Ans: Bad debts are written off as an expense in the profit and loss account. The provision for bad debts is adjusted by creating a provision account and deducting it from the debtors’ balance in the balance sheet.

11. What adjusting entry would be made for outstanding expenses?

Ans: The adjusting entry for outstanding expenses is to debit the relevant expense account and credit the outstanding expenses account, which is shown as a liability in the balance sheet.

12. How is commission received in advance treated in the financial statements?

Ans: Commission received in advance is recorded as a liability, as it pertains to services that will be rendered in future periods. It is shown as income received in advance in the balance sheet.